Systems and methods for optimization of a financial transaction

ABSTRACT

A method of determining a structure for financing a consumer product through a computer implemented process according to one embodiment comprising the steps of: receiving one or more fixed inputs including a monthly payment value and a down payment value; calculating a plurality of potential financial structures for the consumer product based upon the monthly payment value and the down payment value; and determining from the plurality of potential financial structures, a financial structure that provides a greatest profit for a seller of the consumer product.

CROSS-REFERENCE TO RELATED APPLICATIONS

This patent application is a continuation of and claims benefit tocopending application Ser. No. 13/278,178, filed Oct. 21, 2011, entitled“SYSTEMS AND METHODS FOR OPTIMIZATION OF A FINANCIAL TRANSACTION,”assigned to the same Assignee hereof. The aforementioned application isa continuation of and claims benefit to patented Ser. No. 11/627,846,filed Jan. 26, 2007, entitled “SYSTEMS AND METHODS FOR OPTIMIZATION OF AFINANCIAL TRANSACTION,” assigned to the same Assignee hereof.

BACKGROUND OF THE INVENTION

1. Technical Field

The present invention relates to automated credit approval systems andmethods. More specifically, the present invention relates to automatedcredit approval systems and methods used when conducting a financialtransaction for a vehicle.

2. Discussion of the Related Art

In the used car industry, there are many people with sub-prime creditwho are looking to purchase a vehicle. In general, people with badcredit are simply looking to buy any reasonably drive-worthy vehiclethat the dealer is willing to sell to them and for which they are ableto obtain financing provided the financing company agrees to the downpayment amount and the monthly payment amount they can afford.Historically, in order for a person with bad credit to receive approvalon financing, a lender would need to review the person's loanapplication and make a determination as to whether financing would beapproved or rejected. In many instances, this process could be three orfour days, thus preventing a deal from being made on the spot. Anytime,the person leaves the car lot without the deal being completed there isa greater chance that the person will walk away without purchasing thevehicle.

Thus, more recently, automated loan approval systems have becomeavailable. For example, one such system is described in U.S. patentapplication Ser. No. 10/043,676, filed Jan. 9, 2002, entitled METHODSAND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILE DEALERS, whichapplication is incorporated herein by reference in its entirety. Anothersuch automated approval system is described in U.S. Pat. No. 6,950,807,issued Sep. 27, 2005, entitled SYSTEM AND METHOD FOR PROVIDINGFINANCING, which patent is incorporated herein by reference in itsentirety.

While these automated approval systems have greatly enhanced the abilityof a dealer to close a deal the same day that the person walks onto thelot, there are improvements upon these systems that can be made to aid adealer in putting together the best deal possible.

SUMMARY OF THE INVENTION

The embodiments described herein provide systems and methods forproviding a seller of a consumer product with the greatest profit whenstructuring a loan for a financial transaction within the constraints ofthe down payment amount and the monthly payment amount a consumer canafford.

One embodiment can be characterized as a method of determining astructure for financing a consumer product through a computerimplemented process comprising the steps of: receiving one or moreinputs including a monthly payment value and a down payment value;calculating a plurality of potential financial structures for theconsumer product based upon the monthly payment value and the downpayment value; and determining from the plurality of potential financialstructures, a financial structure that provides a greatest profit for aseller of the consumer product. Optionally, the embodiment can furtherinclude the steps of: selecting the financial structure that providesthe greatest profit for the seller of the consumer product; andoutputting to a display device an indication of the financial structurethat provides the greatest profit for the seller of the consumerproduct. Alternatively, some embodiments can further include the stepsof: calculating a plurality of potential financial structures for eachof a plurality of consumer products based upon the monthly payment valueand the down payment value; and determining from the plurality ofpotential financial structures, a financial structure that provides agreatest profit for a seller for each of the plurality of consumerproducts. In one embodiment, when the consumer is not very particularabout the product, the seller can determine which product from theplurality of the consumer products he wants to sell to the consumer, forexample, on the basis of profit/price ratio and the demand for thatparticular product.

Another embodiment can be characterized as a method of determining astructure for financing a consumer product through a computerimplemented process comprising the steps of: receiving one or moreinputs including a monthly payment value and a down payment value;storing a first dealer profit value calculated using the monthly paymentvalue, the down payment value and a first of a plurality of loan-termlengths; calculating a second dealer profit value based upon the monthlypayment value, the down payment value and a second of the plurality ofloan-term lengths; and determining the greater of the first dealerprofit value and the second dealer profit value.

A subsequent embodiment includes a method of determining a structure forfinancing a consumer product through a computer implemented processcomprising the steps of: receiving one or more inputs including amonthly payment value and a down payment value; storing a first dealerprofit value calculated based upon the monthly payment value, the downpayment value and a first of a plurality of loan-term lengths;calculating an amount financed value based upon at least the monthlypayment value and a second of a plurality of loan-term lengths;calculating a vehicle purchase price based upon at least the amountfinanced value and the down payment value; calculating a second dealerprofit value based upon a second of the plurality of loan-term lengths;and determining the greater of the first dealer profit value and thesecond dealer profit value.

BRIEF DESCRIPTION OF THE DRAWINGS

The above and other aspects, features and advantages of the presentembodiments will be more apparent from the following more particulardescription thereof, presented in conjunction with the followingdrawings, wherein:

FIG. 1 is a flow diagram depicting a sub-prime automobile financingprocedure according to the prior art;

FIG. 2 is a flow diagram depicting a sub-prime automobile financingprocedure according to one embodiment;

FIG. 3 is a diagram depicting a screen shot of a software program for asub-prime automobile financing system according to one embodiment;

FIG. 4 is a diagram depicting a screen shot of the software programshown in FIG. 3, where the software program permits a sub-primefinancing procedure to be applied to a specified car, or to all cars ina dealership inventory;

FIG. 5 is a diagram depicting a screen shot of the software programshown in FIG. 3, where the software program prompts a user to input adown payment value and monthly payment value according to oneembodiment;

FIG. 6 is a diagram depicting a screen shot of the software programshown in FIG. 3, where the software program has adjusted the terms of adeal structure (e.g., price and loan-term length) for a specific car inresponse to input of the down payment valued and the monthly paymentvalue such as depicted in FIG. 5;

FIG. 7 is a flow diagram depicting a method for maximizing a dealer'sgross profit on a financial transaction of a vehicle according to oneembodiment;

FIG. 8 is a diagram depicting a screen shot of the software programshown in FIG. 3, where the software program prompts a user to input adown payment value, a monthly payment value, and the minimum dealerprofit acceptable by the dealer for a sale according to one embodiment;

FIG. 9 is a diagram depicting a screen shot of the software programshown in FIG. 3, where the software program rank orders a dealer'sinventory of cars according to the gross profit possible for the dealer,based on the input of a customer's fixed down payment, the customer'sfixed monthly payment, and the minimum dealer gross acceptable for asale, as depicted in FIG. 8; and

FIG. 10 is a flow diagram depicting a method for determining a maximumdealer's gross profit on a financial transaction of a vehicle whiletaking into consideration certain limiting factors according to oneembodiment.

Corresponding reference characters indicate corresponding componentsthroughout the several views of the drawings. Skilled artisans willappreciate that elements in the figures are illustrated for simplicityand clarity and have not necessarily been drawn to scale. For example,the dimensions, sizing, and/or relative placement of some of theelements in the figures may be exaggerated relative to other elements tohelp to improve understanding of various embodiments. Also, common butwell-understood elements that are useful or necessary in a commerciallyfeasible embodiment are often not depicted in order to facilitate a lessobstructed view of these various embodiments. It will also be understoodthat the terms and expressions used herein have the ordinary meaning asis usually accorded to such terms and expressions by those skilled inthe corresponding respective areas of inquiry and study except whereother specific meanings have otherwise been set forth herein.

DETAILED DESCRIPTION

The following description is not to be taken in a limiting sense, but ismade merely for the purpose of describing the general principles of theembodiments described herein. The scope of the invention should bedetermined with reference to the claims. The present embodiments addressthe problems described in the background while also addressing otheradditional problems as will be seen from the following detaileddescription.

The embodiments described herein below are specific to the sub-primeauto financing industry; however, the system and methods described canalso optionally be utilized in other industries, such as, for examplethe financing of any new or used vehicle or consumer product, such asautomobiles, motorcycles, All Terrain Vehicles (ATVs), campers,Recreational Vehicles (RVs), boats, jet skis, water craft and otherconsumer products that can be financed.

Additionally, some of the following embodiments greatly enhance theability of a dealer to close a deal the same day that the person walksonto the lot and aid a dealer in putting together the best dealpossible. A ‘best deal’ is a deal that maximizes the dealer profitwithin the constraints of the down payment amount and the monthlypayment amount that a customer can afford. Dealer profit is notnecessarily maximized by just increasing the price of the vehicle toallowable limits.

Referring to FIG. 1 a flow diagram 100 is shown depicting a sub-primeautomobile financing procedure according to the prior art.

First, in step 102, a customer goes to a dealership to review carinventory in the hopes of finding a vehicle to purchase. If the customercannot pay for the vehicle with available cash, the customer will mostlikely look to finance the vehicle. A sub-prime customer (i.e. acustomer with a credit score that is less than ideal) brings the initialdown payment to the deal and also usually has a requested maximummonthly payment. The customer is generally less concerned (if at all)with other terms of the deal, such as, for example, the vehicle cost,the vehicle type, loan term and the interest rate of the loan. Theseother terms of the deal are less important because the customergenerally is simply looking to purchase any vehicle he/she qualifiesfor.

Next, in step 104, the customer will ask to see what vehicles he/shequalifies for based on the down payment and the monthly payment thecustomer can afford. In step 106, the dealer utilizes a softwareprogram, such as the Deal Management Software System, disclosed anddescribed in U.S. patent application Ser. No. 10/043,676, filed Jan. 9,2002, entitled METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILEDEALERS, to input or adjust the price, financing loan-term length,interest rate, trade-in value of the customer's vehicle, and other inputparameters to try meet the customer's needs. Another such program isdescribed in U.S. patent application Ser. No. 11/332,616, filed Jan. 13,2006, entitled METHODS AND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILEDEALERS which application is incorporated herein by reference in itsentirety.

Based on the values input by the dealer, the software program calculatesthe customer's monthly payment, down payment, the dealer's gross profitfrom the sale, and other information, as shown in step 108. Following,in step 110, the dealer compares the resulting monthly and down paymentsand other factors with those requested by the customer. If the monthlyand down payments and other factors are comparable to those requested bythe customer, the dealer moves on to step 112. Otherwise, the dealermust go back to step 106 and adjust the price, term, interest rate, andother variables of the deal. At step 112, the dealer checks to seewhether he will sufficiently profit from the deal. For instance, if thedealer has a minimum desired gross profit of $1000 per car, and theprofit from the deal results in only an $800 profit, the dealer willadjust the price, term, interest rate, and other variables of the dealat step 106.

Once the dealer's profit meets a sufficient level and the customer'sdown payment value and monthly payment value have been approximatelymet, at step 114, the dealer presents the deal to the customer, who caneither reject the deal, sending the process back to step 106, or acceptthe deal, as shown in step 116. Presumably, the customer will accept thedeal, since the customer's requests regarding the monthly payment andthe down payment have been met. As is apparent, this prior art procedurerequires the dealer to manually adjust terms of the deal to try to meetboth the dealer's and the customer's financial needs. Additionally, thiscan result in financing deals that do not provide the dealer with thegreatest profit as there is no way for the dealer to know what dealstructure will provide him/her the greatest profit, waste the dealer andcustomer's time, potentially leave the customer buying a car that doesnot best meet his/her needs and potentially lose business by not makinga deal at all.

In order to solve the problems described above and enhance automatedfinancial approval systems, various systems and methods for structuringa loan that provides a dealer with the greatest profit are describedbelow with reference to FIGS. 2-9.

Referring now to FIG. 2, a flow diagram 200 is shown depicting asub-prime automobile financing procedure according to one embodiment.

At step 202, a customer having sub-prime credit goes to a dealership toreview car inventory in the hopes of finding a vehicle to purchase. Asdescribed above, if the customer can not pay for the vehicle withavailable cash, the customer will most likely look to finance thevehicle. A sub-prime customer (i.e. a customer with a credit score thatis less than ideal) brings the initial down payment to the deal and alsousually has a requested maximum monthly payment. Similar to above, thecustomer is generally less concerned (if at all) with other terms of thedeal, such as, for example, the vehicle cost, the vehicle type, and theinterest rate of the loan. These other terms of the deal are lessimportant because the customer generally is simply looking to purchaseany vehicle they qualify for.

Next, in step 204, the customer will ask to see what vehicles theyqualify for based on the down payment and the monthly payment thecustomer can afford. At step 206, the dealer inputs the customer'sdesired down payment and monthly payments, and other considerations(e.g., trade-in allowance), into a sub-prime automobile financingsoftware application for a particular vehicle in his/her vehicleinventory. In accordance with the present embodiment, the softwareapplication includes dealer profit maximizing feature. This feature ofthe software application is referred to herein, for example as “MaximizeVehicle Profit” or the MVP′ system or application. Based on the inputvalues for the down payment and monthly payment, in step 208, the MVP™system automatically determines the terms of the deal (e.g., vehicleprice, loan-term length, and the interest rate) that provide the dealerwith the greatest profit while meeting the desired financial terms ofthe customer. No guess work or re-entering of terms is necessary such aswas required in the prior art systems described above. One exemplaryprocess of maximizing the dealer profit for a vehicle is describedherein below with reference to FIG. 7.

At step 210, the dealer checks to see whether he will sufficientlyprofit from the deal. Since the MVP™ system maximizes the profit for thedealer for any particular car, the dealer will always be happy with adeal unless there is no combination of deal terms for the car that meetsthe dealer's minimum profit requirement. One embodiment that isdiscussed below with reference to FIGS. 8 and 9 permits the dealer topre-select only those cars that will meet his profit requirement. Atthis point, the dealer will present the financial terms of the deal tothe customer at step 212 or will require the customer to choose adifferent car. Because the deal is structured to always exactly orapproximately meet the customer's requests regarding the monthly paymentamount and the down payment amount, the customer has a high probabilityof accepting the deal, as shown in step 214.

Referring next to FIG. 3, a diagram is shown illustrating a screen shotof a software program for a sub-prime automobile financing system 300according to one embodiment. It should be understood that many differenttypes of information and user interfaces can be utilized in variousembodiments and that the specific implementation shown in thisapplication is merely illustrative of one user interface. The variousdisplay panels and information provided to the user will vary indifferent embodiments.

The automobile financing system 300 includes a user interface screen302. The user interface screen 302 includes four display panels: a dealstructure panel 304, a calculation results panel 306, a vehicleinformation panel 308, and an approval panel 310. The user interfacescreen 302 also includes a dealer profit maximizing function 312 (alsoreferred to herein as the MVP™ function 312). The user interface screen302 can optionally also includes another section that containscustomer's credit report information and other demographics.

The deal structure panel 304 displays information related to thestructure of the deal. For instance, the deal structure panel 304displays the terms of the deal, including: price of the financed car, atrade-in value given to a car traded in by the customer, the amountstill owed on the trade-in vehicle, the amount of cash down to be paidby the customer, the cost of a service contract for the vehicle, titlefees, insurance, and gap-insurance charges, and the amount of taxes tobe paid by the customer. Further terms include the number of payments(loan-term length), the amount of each payment, the date of the firstpayment, and the sales tax rate.

The deal structure panel 304 is also user editable such that the termscan be changed by a user by clicking or navigating to the term displayfield and typing in any specified amount. For instance, to edit theprice of the car, a user would click on the current price (depicted inFIG. 3 as $6,427.25) and type in a new price. When terms in the dealstructure panel 304 are edited, some non-editable values in the dealstructure panel 304, the deal approval panel 310 and the calculationresults panel 306 are updated accordingly. For instance, raising theprice of the car will automatically update the sales tax in the dealstructure panel 304, and automatically update the dealer gross in thecalculation results panel 306.

Finally, the deal structure panel 304 displays the maximum amount offinancing the customer is permitted to obtain (i.e., “MAX OK TO FIN”).The amount permitted to be financed is based on several factors, suchas, for example, the customer's credit score and the worthiness of thecar that comes after taking into consideration the input values in thepanel 308. In one exemplary embodiment, the automobile financing system300 utilizes the credit processing features described in U.S. patentapplication Ser. No. 10/043,676, filed Jan. 9, 2002, entitled METHODSAND SYSTEMS FOR DEAL STRUCTURING FOR AUTOMOBILE DEALERS to pull thecustomer's credit scores and to determine the amount of financing toafford the customer.

The calculation results panel 306 displays the fees to be paid by thedealer, and the dealer profit for the terms of the current deal. Forinstance, the calculation results panel 306 displays the amount of thedealer's financial services fee (shown in FIG. 3 as “Westlake Discount”)and acquisition fee. The financial services fee is generally set by thefinancing company, and may be a fixed cost, or may be based on factorssuch as the sale price of the vehicle, amount to be financed, thevehicle being sold, the customer worthiness and the interest rate. Thecalculation results panel 306 also displays how much money will be paidto the dealer (shown in FIG. 3 as “Net Check to Dealer”), which is equalto the amount financed, less the financial services fee (shown as“Discount” in the calculation results panel 306) and acquisition fee.The calculation results panel 306 also displays the amount of profit thedealer will make on the deal (shown in FIG. 3 as “Dealer Gross”). Thedealer's profit, in the present example, is equal to the sale price ofthe car, plus document fees, plus warranty amount, less warranty cost,less the cost of the vehicle (shown as “Cost” in the vehicle informationpanel 308), less the financial services fee, less acquisition fee andthe overadvance amount. The overadvance amount is the difference betweenactual amount financed and the “MAX OK TO FIN” if actual amount financedis more than the “MAX OK TO FIN” within some prescribed limit (e.g.,$1000.00). Certain finance companies let the dealer pay the differencetill the entire loan-term length is successfully over without customerdefaulting in between. Once the loan-term length is over, the financingcompany returns this difference amount back to the dealer. Not allfinance companies have a loan structure that includes the concept of an“overadvance,” thus the above calculation is only illustrative and adealer's profit can be calculated differently in other embodiments. Forexample, the above calculation may include or exclude differentvariables depending upon the structure of the deal.

The vehicle information panel 308 displays information pertaining to aselected vehicle. For example, a vehicle from the dealer's localinventory or a vehicle from a larger dealer network can be selected andthe information about the selected vehicle will be displayed in thevehicle information panel 308. Information that is displayed in thevehicle information panel 308 includes, for example, vehicle make,model, year, mileage, NADA book value/KBB book value, car cost to thedealer, car class type, car type. The information can also includewarranty cost to the dealer and the finance charge/profit to thefinancing company. Again, as mentioned above, different fields will bedisplayed to a user depending upon the specific user interface of thesoftware application.

The deal approval panel 310 displays whether the structure of the dealand the amount financed are approved. Whether the deal is approveddepends upon the terms of the deal, such as, for example, the vehicleprice, number of payments (term length), and amount of each payment. Forinstance, if the lender will not finance any buyer for more than 40months, when a deal calls for a term of 50 months, the deal structurewill not be approved. If the dealership refuses to sell any car for lessthan $500, a deal with a sale price of $450 will also be rejected. Theamount financed approval depends upon whether the amount financedexceeds the approved maximum financing amount that was discussed above.If the amount financed exceeds the approved maximum, the deal will haveto be restructured in order for the deal to be approved. As describedabove, in prior systems, a dealer would need to manipulate the variousterms of the deal in an effort to find a structure that is approved andalso provides the dealer with an acceptable profit on the vehicle. Thedeal that is best for the dealer is likely not readily apparent to thedealer causing a dealer, for example, to accept any approved deal.

In accordance with the embodiments described herein, the MVP™ function312 automatically structures any deal to maximize the dealer's profit aswell as satisfies the constraints on down payment and monthly paymentput forth by the customer.

Referring next to FIG. 4, a diagram is shown illustrating a screen shotof the software program shown in FIG. 3, wherein the software programpermits a sub-prime financing procedure to be applied to a specifiedcar, or optionally to all cars in a dealership inventory. According toone embodiment, as shown in FIG. 4, when a user accesses the MVP™function 312, the automobile financing system 300 displays an optionwindow 400. The option window 400 comprises a current vehicle feature402 that permits the dealer profit maximizing function to be applied toa specific car, and a compare all inventory feature 404 that applies thedealer profit maximizing function to all cars accessible to thedealership through its inventory and/or dealership network.

If a user selects the compare all feature 404 instead of the currentvehicle feature 402, then the MVP™ function 312 will be applied to allcars accessible to the dealership through its inventory and/ordealership network. This procedure is described below with reference toFIGS. 8 and 9. According to one embodiment, if a user selects thecurrent vehicle feature 402, the MVP™ function 312 is applied to thevehicle currently displayed in vehicle information panel 308. Uponselection of the current vehicle feature 402 the software programproceeds in prompting the user for information such as is shown in FIG.5.

Referring next to FIG. 5 a diagram is shown depicting a screen shot ofthe software program shown in FIG. 3, where the software program promptsa user to input a down payment value and monthly payment value bydisplaying a prompt window 500 according to one embodiment.

The prompt window 500 includes a down payment field 502, and a monthlypayment field 504. The user enters a down payment value that thecustomer says he/she can afford into down payment field 502, a monthlypayment value that the customer says he/she can afford into monthlypayment field 504, and selects “Calculate.” The software program thenautomatically adjusts the loan-term length and vehicle price to maximizethe dealer's profits. Thus, as shown in FIGS. 4, 5, and 6, when a downpayment of $2,250.00 and a monthly payment of $250.00 are input into theprompt window 500, the price of the car is raised from $6,427.25 to$7,122.73, the number of payments/loan-term is reduced from 31 to 26,and the dealer profit increases from $1,502.25 to $2.062.73. In priorsystems, the dealer would have had to guess and the various terms (e.g.,the Loan-Term and Vehicle Price) in order to maximize his/her profit.This was a time consuming and unreliable process if it was evenattempted by the dealer. Due to the large number of combinations of Termand Vehicle Price, there is a good chance that the dealer would end upputting together a deal that did not provide him/her with the greatestprofit. One exemplary process for determining the maximum profit for thedealer is described with reference to FIG. 7.

Referring next to FIG. 7, a flow diagram 700 is shown depicting anexemplary method for maximizing a dealer's gross profit on a financialtransaction of a vehicle according to one embodiment. Generally, thesoftware program operates by varying the length of the term (T) (i.e.the number of payments required before the loan is paid off) to maximizethe dealer's profit for the selected vehicle.

First, at step 702, the customer's desired monthly payment (FP) and downpayment (DP) are input into the system 300, as discussed above withreference to FIG. 6. Following, at step 703, T is initialized to aminimum allowable value for T. The initial value of T is a minimum valuespecified by the dealership, the system 300, or by the customer and canbe dependent on a number of variables, including, for example, a creditscore, loan amount or buyer income among other things. Optionally, theminimum value of T can be set to one (1) indicating only one monthlypayment will be necessary to pay off the loan. Alternatively, forexample, T can be set to twelve (12) indicating a loan-term of one year.Next, at step 704, the software program calculates the amount (A) to befinanced for loan-term length (T). The amount (A) to be financed can becalculated, for example, using the following formula, where APR is anannual percentage rate (APR):

$A = {{FP}*\frac{12}{APR}*\left\lbrack {1 - \left\{ {1 + \frac{APR}{12}} \right\}^{- T}} \right\rbrack}$

Since the customer specifies the desired monthly payment value (FP), asdiscussed above, and since the APR is a constant rate usually specifiedby the financier, the amount to be financed is varied only by thecurrent term length (T).

Next, at step 706, the resulting vehicle sale price (P) is calculated.The vehicle sale price (P) is determined, for example, by using thefollowing formula:

P = A − DP + (Trade-In  Allowance) − (Document-Fees) − (Smog-Fees) − (Sales  Taxes) − (Warranty-Amount) − (Licensed-Fees) − (Trade-Payoff) − (Insurance-Amounts) − (Miscellaneous)

Aside from the amount (A) to be financed which we calculated above, theremainder of the variables are either constant or a linear or non-linearfunction of other constants and Price. Because of this inherentnon-linearity, the relation between price (P) and A is directlyproportional, though not necessarily linear.

All of the calculations described herein are exemplary for a specificautomated financial software program (or potentially partiallyautomated) loan approval system. However, the calculations can easily bemodified to work with any kind of financial approval system. Forexample, the non-linearity/linearity described above may not be presentin other financial systems. Thus, one of ordinary skill in the art wouldbe able to adapt the equations and calculations described herein toother financial systems that may have a different approval process ordifferent costs that must be taken into account when structuring theentire deal.

Following, at the next step, step 708, after calculating the vehiclesale price (P), it is determined whether the structure of the deal andthe amount (A) to be financed are approved, as discussed above. The nextstep involves calculating the dealer profit according to the followingformula:

(Dealer Profit)=(Vehicle Sale Price)−(Vehicle Purchase Price)−(FinancialServices Fee)−(Acquisition Fee)+(Document Fees)+(WarrantyAmount)−(WarrantyCost)−(OverAdvance Amount)

The Vehicle-Sale-Price, Acquisition Fee and Vehicle-Purchase-Price areconstant or determined from the previous step. TheFinancial-Services-Fee varies depending upon the structure of the dealand is calculated, for example, as described in U.S. patent applicationSer. No. 11/332,616, filed Jan. 13, 2006, entitled METHODS AND SYSTEMSFOR DEAL STRUCTURING FOR AUTOMOBILE DEALERS, which is incorporatedherein in its entirety. The remainder of the components are eitherconstant or vary as per the deal structure.

If the structure and amount are not approved, the process continues tostep 714. Otherwise, the process continues to step 710 where the dealerprofit is compared to a prior recorded dealer profit (e.g., for adifferent term length T). If the newly computed dealer profit is largerthan the prior recorded dealer profit, the current values for theloan-term T, vehicle sale price (P), and dealer profit are stored andthe prior recorded values dealer profit, they remain saved and theprocess continues to step 714. It should be understood that for thefirst value of T that provides an approved deal, no comparison needs tobe made, the values for loan-term T, vehicle sale price (P), and dealerprofit are simply stored by the software program.

At step 714, the value of T is incremented, for example by one intervalcorresponding to a term length of T+1. Alternatively, if the financingloan-term is only valid in 3 or 6 month increments, then T can beincreased by 3 or 6, respectively. Next, at step 716, the new value of Tis compared to a maximum permitted value of T. Generally, the maximumvalue permitted for T is, for example, 72, indicating the loan will bepaid off after 6 years. However, the maximum value for T can be changeddepending upon the credit score, loan amount or other variables. If thevalue of T is less than or equal to the maximum value for T, the processreturns to step 704, where steps 704 through 716 are repeated with thenew, larger value of T. Otherwise, the process moves to step 718, wherethe MVP™ function determines whether any terms are stored. If none arestored, no combination of terms met the approval process discussed abovewithin the constraints put forth by the customer for that particularvehicle/car. If, however, there are stored terms, they reflect thoseterms that maximize the dealer profit. These terms are considered theoptimized solution for the dealer and the customer, and are selected tospecify the terms of the deal, as indicated in step 720. These are theterms that give the dealer the greatest profit on the vehicle.

In this way, after iterating from the minimum to maximum value for T,the terms that maximize the dealer profit for a given vehicle are alwaysidentified and selected. It is important to note that in one embodiment,however, since the financial services fee is determined based on thecost of the vehicle and/or the amount financed, merely having thehighest possible vehicle sale price does not guarantee the highestpossible dealer profit. Thus, a dealer who did not have access to theMVP™ function 312 described herein would likely have a very hard timeattempting to structure a deal that provides the dealer with thegreatest profit.

Additionally, as described herein, the “greatest profit” or “maximumprofit” describes a value that is the largest value out of a pluralityof values that are calculated using a finite number of term lengths T.Generally, when structuring a loan, the T will be an integer numbercorresponding to a number of months of the term of a loan. Thus, the“greatest profit” or “maximum profit” may not be the absolute maximumdollar amount that can be calculated using the above equations (or othersuitable equations), but is the greatest value when taking intoconsideration the general constraints of a loan. For example, there is alimit on minimum Payment amount per month that the finance company willaccept. Thus, while the above equations may provide a result, thefinance company will not approve the loan.

Referring back to FIG. 4, in one embodiment, if a user selects thecompare all inventory feature 404 instead of the current vehicle feature402, then the MVP™ function 312 will be applied to all cars accessibleto the dealership through its inventory and/or dealership network.

FIG. 8, is a diagram illustrating a screen shot of the software programshown in FIG. 3, where the software program prompts a user to input adown payment value, a monthly payment value, and the minimum dealerprofit acceptable for a sale according to one embodiment. As shown inFIG. 8, after selecting the compare all feature 404, system 300 displaysa vehicle listing window 800 comprising a down payment field 802, amonthly payment field 804, a minimum dealer profit field 806 and avehicle list 808. The user enters the customer's desired down paymentinto down payment field 802, the customer's desired monthly payment intomonthly payment field 804, the dealer's desired minimum profit intominimum dealer profit field 806, and selects “Calculate.”

FIG. 9 is a diagram illustrating a screen shot of the software programshown in FIG. 3, where the software program rank orders a dealer'sinventory of cars according to the gross profit possible for the dealer,based on the input of a customer's fixed down payment, the customer'sfixed monthly payment, and the minimum dealer gross acceptable for asale. As shown in FIG. 9, the software program (MVP™ function 312) thenautomatically displays a listing of all the vehicles in the dealer'sinventory and/or dealership network that meet the specified criteria invehicle list 808. The vehicles are rank ordered by dealer profit, whichis the maximum amount of profit the dealer will make if he sells theparticular vehicle using the MVP™ function 312 specified deal terms.Thus, the MVP™ function 312 permits a dealer to identify cars that willmaximize his profit for a given customer prior to trying to sell any carto the customer, saving time and hassle, and ensuring both the dealerand the customer are satisfied with the deal and the vehicle eventuallychosen. The software program runs the method described above withreference to FIG. 7 for every car on the lot and displays a list of allof the vehicles for which a valid deal can be put together. Asdescribed, the list is ordered by the maximum dealer profit that can beobtained for each vehicle. If the dealer's maximum profit for a specificcar is lower than the minimum dealer profit specified in field 806, thenthe car is dropped from consideration. Once each car in the dealer'sinventory and/or dealer network has been considered, those that meet thedealer's minimum profit threshold are rank ordered and displayed to theuser in vehicle list 808.

When the dealer selects any vehicle in the vehicle list 808, the MVP™function 312 specified deal terms are automatically propagated into theterm display fields of deal structure panel 304, and the vehicleinformation is automatically displayed by the vehicle information panel308. The compare all feature 404 of the software program described abovewith reference to FIG. 4, according to one embodiment, operates verysimilarly to the current vehicle feature 402 discussed above, and onlyadds an additional iterative loop. That is, for each car in the dealer'sinventory and/or dealer network, the software programs operates asdescribed above with respect to the current vehicle feature 402 and themethod described in FIG. 7.

Similar to the above, the “greatest profit” or “maximum profit”describes a value that is the largest value out of a plurality of valuesthat are calculated using a finite number of term lengths T. Generally,when structuring a loan, the T will be an integer number correspondingto a number of months of the term of a loan. Thus, the “greatest profit”or “maximum profit” may not be the absolute maximum dollar amount thatcan be calculated using the above equations (or other suitableequations), but is the greatest value when taking into consideration thegeneral constraints of a loan. For example, as described above, there isa limit on minimum Payment amount per month that the finance companywill accept. Thus, while the above equations may provide a result, thefinance company will not approve the loan.

Referring next to FIG. 10, a flow diagram 1000 is shown depicting anexemplary method for maximizing a dealer's gross profit on a financialtransaction of a vehicle while taking into consideration certainlimiting factors according to one embodiment. Generally, the softwareprogram operates by varying the length of the term (T) (i.e. the numberof payments required before the loan is paid off) to maximize thedealer's profit for the selected vehicle. Additionally, the softwareprogram can limit other variables in the calculations (e.g., a maximumloan-term length that the buyer is willing to accept) and determine thebest structure for the dealer while meeting the buyer's needs.

First, at step 1002, the customer's desired monthly payment (FP) anddown payment (DP) are input into the system 300, as discussed above withreference to FIG. 6. Following, at step 1003, T is initialized to aminimum allowable value for T. The initial value of T is a minimum valuespecified by the dealership, the system 300, or by the customer and canbe dependent on a number of variables, including, for example, a creditscore, loan amount or buyer income among other things. Optionally, theminimum value of T can be set to one (1) indicating only one monthlypayment will be necessary to pay off the loan. Alternatively, forexample, T can be set to twelve (12) indicating a loan-term of one year.Next, at step 1004, the software program calculates the amount (A) to befinanced for loan-term length (T).

The amount (A) to be financed can be calculated, for example, using thefollowing formula, where APR is an annual percentage rate (APR):

$A = {{FP}*\frac{12}{APR}*\left\lbrack {1 - \left\{ {1 + \frac{APR}{12}} \right\}^{- T}} \right\rbrack}$

Since the customer specifies the desired monthly payment value (FP), asdiscussed above, and since the APR is a constant rate usually specifiedby the financier, the amount to be financed is varied only by thecurrent term length (T).

Next, at step 1006, the resulting vehicle sale price (P) is calculated.The vehicle sale price (P) is determined, for example, by using thefollowing formula:

P = A − DP + (Trade  In  Allowance) − (Document  Fees) − (Smog  Fees) − (Sales  Taxes) − (Warranty  Amount) − (License  Fees) − (Trade  Payoff) − (Insurance  Amounts) − (Miscellaneous)

Aside from the amount (A) to be financed which we calculated above, theremainder of the variables are either constant or a linear or non-linearfunction of other constants and Price. Because of this inherentnon-linearity, the relation between price (P) and A is directlyproportional, though not necessarily linear.

Following, at the next step, step 1008, after calculating the vehiclesale price (P), it is determined whether the structure of the deal andthe amount (A) to be financed are approved, as discussed above. The nextstep involves calculating the dealer profit according to the followingformula:

(Dealer−Profit)=(Vehicle−Sale−Price)−(Vehicle−Purchase−Price)−(Financial−Services−Fee)−(AcquisitionFee)+(Document−Fees)+(Warranty Amount)−(WarrantyCost)−(OverAdvanceAmount)

The Vehicle-Sale-Price, Acquisition Fee and Vehicle-Purchase-Price areconstant or determined from the previous step. TheFinancial-Services-Fee varies depending upon the structure of the dealand is calculated, for example, as described in U.S. patent applicationSer. No. 11/332,616, filed Jan. 13, 2006, entitled METHODS AND SYSTEMSFOR DEAL STRUCTURING FOR AUTOMOBILE DEALERS. The remainder of thecomponents are either constant or vary as per the deal structure.

Again, as stated above, all of the calculations described herein areexemplary for a specific automated financial software program (orpotentially partially automated) loan approval system. However, thecalculations can easily be modified to work with any kind of financialapproval system. For example, the non-linearity/linearity describedabove may not be present in other financial systems. Thus, one ofordinary skill in the art would be able to adapt the equations andcalculations (or create different calculations and equations) describedherein to other financial systems that may have, for example, adifferent approval process or different costs that must be taken intoaccount when structuring the entire deal.

If the structure and amount are not approved, the process continues tostep 1014. Otherwise, the process continues to step 1010 where thedealer profit is compared to a prior recorded dealer profit (e.g., for adifferent term length T). If the newly computed dealer profit is, forexample, closer to the dealer's expected gross-profit within apredefined range, the current values for the loan-term T, vehicle saleprice (P), and dealer profit are stored and the prior recorded valuesfrom step 1012 are disregarded. However, if the previously recordedvalues are closer to the dealer's expected gross-profit, they remainsaved and the process continues to step 1014. In this example, anadditional input into the system is an “expected gross-profit value”that introduces an additional variable that needs to be taken intoconsideration when structuring the financing. Thus, the software programcan be customized to emit a deal structure that matches dealer requestedgross-profit on a deal rather than the “best deal” or greatest profit asdescribed above with reference to FIG. 7. In this example, the dealermay be motivated to limit profit in order to avoid losing a customer whorealizes that his down-payment and monthly-payment requests have beenmet but, for example, the loan-term is too high or the interest rate istoo high. Depending upon the lender, sometimes loan-terms can be loweredat the cost of dealer-profit.

In yet another embodiment, limits can be put on any output variable(e.g., Net Check to Dealer, Discount, Amount Financed, etc.) and thelimited valued is used as an input value into the MVP program. The dealcan then be optimized while taking into account the constraints putforth into the system.

Turning next to step 1014, the value of T is incremented, for example byone interval corresponding to a term length of T+1. Alternatively, ifthe financing loan-term is only valid in 3 or 6 month increments, then Tcan be increased by 3 or 6, respectively. At step 1016, the new value ofT is compared to a maximum permitted value of T. Generally, the maximumvalue permitted for T is, for example, 102, indicating the loan will bepaid off after 6 years. However, the maximum value for T can be changeddepending upon the credit score, loan amount or other variables oralternatively can be limited by as an input value (such as describedabove). If the value of T is less than or equal to the maximum value forT, the process returns to step 1004, where steps 1004 through 1016 arerepeated with the new, larger value of T. In an alternative embodiment,for the methods described in FIGS. 7 and 10, T can be initialized to amaximum value of T in step 1003 (step 703 for FIG. 7) and then reducedat step 1014 (step 7014 for FIG. 7). Steps 1004 through 1016 are thenrepeated where at step 1016, if T is less than the minimal T allowed,the process will continue at step 1018.

At step 1018, the MVP™ function determines whether any terms are stored.If none are stored, no combination of terms met the approval processdiscussed above within the constraints put forth by the customer and/ordealer for that particular vehicle/car. If, however, there are storedterms, they reflect those terms that maximize the dealer profit whileoptionally taking into consideration other input constraints. Theseterms are considered the optimized solution for the dealer and thecustomer, and are selected to specify the terms of the deal, asindicated in step 1020. These are the terms that give the dealer thegreatest profit on the vehicle while taking into constraints in additionto the down payment value and monthly payment value.

In this way, after iterating from the minimum to maximum value for T (orfrom the maximum value of T to the minimum value of T), the terms thatmaximize the dealer profit for a given vehicle are always identified andselected while also taking into consideration other input variables thatmay have constraints. It is important to note that in one embodiment,however, since the financial services fee is determined based on thecost of the vehicle and/or the amount financed, merely having thehighest possible vehicle sale price does not guarantee the highestpossible dealer profit. Thus, a dealer who did not have access to theMVP™ function 312 described herein would likely have a very hard timeattempting to structure a deal that provides the dealer with thegreatest profit while taking into account other input constraints.

Additionally, as described herein, the “greatest profit” or “maximumprofit” describes a value that is the largest value out of a pluralityof values that are calculated using a finite number of term lengths Tand optionally also taking into consideration other constraintsvariables. Generally, when structuring a loan, the T will be an integernumber corresponding to a number of months of the term of a loan. Thus,the “greatest profit” or “maximum profit” may not be the absolutemaximum dollar amount that can be calculated using the above equations(or other suitable equations), but is the greatest value when takinginto consideration the general constraints of a loan and other inputconstraint values. For example, the additional constraint values, asdescribed above, may be a maximum loan-term length the buyer is willingto pay, an expected dealer profit value, loan interest rate or otherinput variables. As described above, these variables may need to be setin order to prevent the customer from walking away from the deal.

The specific equations described herein are exemplary and otherequations used to maximize a dealer's profit may be used in alternativeembodiments. Additionally, the embodiments described herein withreference to FIGS. 2-9 may be implemented using a computer that includesa central processing unit such as a microprocessor, and a number ofother units interconnected, for example, via a system bus. Such acomputer may also include, for example, a Random Access Memory (RAM),Read Only Memory (ROM), an I/O adapter for connecting peripheral devicessuch as, for example, disk storage units and printers to the bus, a userinterface adapter for connecting various user interface devices, acommunication adapter for connecting the computer to a communicationnetwork (e.g., a data processing network) and a display adapter forconnecting the bus to a display device.

Additionally, the various embodiments may be implemented on one or moreof the following exemplary devices including: a personal computer, alaptop, a tablet PC, a Personal Digital Assistant (PDA) and otherelectronic devices independent of the underlying operating system (e.g.,Windows, Linux, MAC, etc.). Additionally, the various embodiments can beimplemented using a distributed computing environment or a localcomputing environment. For example, the embodiment described herein canbe implemented as a personal computer client software architecture aswell as a web-based architecture. In this manner, the user interface canbe, for example, an application interface for a software program that isrunning locally or on a remote computer. Alternatively, the userinterface can be a browser based interface where the computations andmethod described herein are implemented on a remote computer andprovided to a user through the browser application. In accordance withsome embodiments, the various aspects described above may be implementedusing computer programming or engineering techniques including computersoftware, firmware, hardware or any combination or subset thereof. Anyresulting program, having computer-readable code means, may be embodiedor provided within one or more computer-readable media, thereby making acomputer program product, i.e., an article of manufacture, according tothe invention. The computer readable media may be, for instance, a fixed(hard) drive, diskette, optical disk, magnetic tape, semiconductormemory such as read-only memory (ROM), etc., or anytransmitting/receiving medium such as the Internet or othercommunication network or link. The article of manufacture containing thecomputer code may be made and/or used by executing the code directlyfrom one medium, or by copying the code from one medium to anothermedium. In addition, one of ordinary skill in the art of computerscience will be able to combine the software created as described withappropriate general purpose or special purpose computer hardware,Personal Digital Assistant (PDA) hardware, or other electronic hardwareto create a computer system or computer sub-system embodying the variousmethods of the invention.

While the invention herein disclosed has been described by means ofspecific embodiments and applications thereof, other modifications,variations, and arrangements of the present invention may be made inaccordance with the above teachings other than as specifically describedto practice the invention within the spirit and scope defined by thefollowing claims.

1. A method of determining a structure for financing a consumer productthrough a computer implemented process comprising: receiving in acomputer a plurality of inputs including at least a monthly paymentvalue and a down payment value; calculating in the computer a pluralityof potential financial structures for consumer products based upon themonthly payment value and the down payment value; and selecting by thecomputer from the plurality of potential financial structures, afinancial structure that provides a greatest profit for a seller of oneof the consumer products, wherein the consumer product is a vehicle andwherein the potential financial structures include a sub-prime loan.